In today’s video, I explain why it is crucial to your business to understand Robert Kiyosaki’s 4 success quadrants.

First of all, we have the left side of the quadrant. The first one, and the one that most people are involved in is:

Employee–an employee basically trades time for money. We are all taught to go to school, get an education, go to college then get a job and work for a company. However, this is not the best way to make money. Why? You are trading time for money. Also, as was in my case, an employer can pay you on salary which means that they can pay you for 40 hours a week, and work you for 90 hours a week. So here, you are working for 90 hours a week so if you are getting paid lets say $20 and hour–that means that you may only be making $9 to $10 and hour–basically the same amount that you would make working for minimum wage at McDonalds or Taco Bell. Not a great way to increase your earnings.

Next, we have the self-employed person. This would include doctors, lawyers, hairdressors, accountants and the like. In this quadrant, the only way that you can make more money, is again to trade time for money and work longer and harder. There comes a time for these people when they have reached a limit on earnings as they cannot work any longer or harder. Thus there is a limit to their earnings.

The next one is the business owner–and now we are reaching the right side of the quadrant. This is the side that Robert Kiyosaki recommends that we be on. What is the difference between being a self employed person and a business owner? Basically, a business owner has learned to leverage his time. They either use robotics to create items, they create online resources that can work for them 24 hours a day, or outsource menial tasks to employees or sub-contractors to leverage their time. Thus they make more money with they same amount of time. In other words they leverage their time and resources to increase their income.

The last quadrant is the investor. Here and investor buys assets to increase their earnings. So in the case of real estate–they buy rental properties that bring them in cash flow up and above the expenses, that they have in these investments.

Here I would recommend against buying stocks and the like. Why? We have the largest generation retiring–the baby boomers. Everything in our economy runs on supply and demand. When the baby boomers start taking out money to retire from their 401Ks there will be a large supply of stocks which is basically investment in business. When there is an abundance of anything, the price goes down for that item. Thus, if there is an abundance of stock and less investors to buy it up the price of stock WILL go down. It has to. So better investments are real estate and the like.

Something that people don’t know about is something called a “self directed retirement plan.” Here you can legally take money out of a 401k and put it to investments that you direct. This is huge. A few years ago when real estate was cheap I took my money out of a 401k put it in one of these self-directed retirement accounts and doubled my money while also having cash flow from those investments–around $2500 a month so I have netted a Return On Investment of well over 100%. This is how the rich get richer.

The other thing about being an investor or a business owner is that the tax system is designed so that these classes pay very little if any in income taxes. So you also have MORE EARNED INCOME if you are an employee. This is crucial to increasing your income and net worth.